The Morrison government has gained new scope to deliver sweeping personal tax cuts in the April budget following a massive surge in the global iron ore price that could pour up to $6 billion into federal coffers.

The surprise budget boost gives Prime Minister Scott Morrison a war chest to fight the May election by giving workers another round of tax cuts as well as producing a bigger surplus earlier than expected.

A lift in the iron ore price will add billions to the federal budget. Credit:Michele Mossop

The price of iron ore, which was already well above the government's forecasts in last year's economic statement, soared about 13 per cent in the wake of a major dam collapse in Brazil in January which is expected to lift demand for Australian resources.

Lagging in the opinion polls, the Coalition could use the unexpected growth in Commonwealth revenue to cut income taxes in a new strategy to help address stagnant wages and match or exceed Labor's tax pitch.

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Mr Morrison is currently offering an offset of up to $530 next year compared to the $928 promised by Opposition Leader Bill Shorten.

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Labor has estimated its plan would sacrifice $5.8 billion in revenue over four years on top of the government proposal. The spike in the iron ore price means the Coalition now looks likely to have at least that much in additional budget revenue, or possibly more.

"This is an election year, it’s the sort of thing governments do in election years. The point about it all is that the government’s budget projections are already on track for surplus next financial year.

"They could announce additional tax cuts to the ones that have already been passed into law, and in addition to what they’ve already flagged thanks to this revenue flow coming into Canberra."

Mr Oliver said each $US10 difference in the iron ore price above Treasury expectations lifts Commonwealth revenue by about $3 billion to $4 billion over a full year.

"There are obviously lags involved, the price goes up, the companies then start to get the revenue and then that gets paid in tax. So the full impact will probably become most apparent in the 2019-20 fiscal year," he said.

National Australia Bank group chief economist Alan Oster said the revenue boost could be added to the $9.2 billion in revenue "decisions" the government has taken but not yet announced.

"So you’re probably talking, depending whether this thing continues and what the assumptions are, about another $5 billion to $6 billion of additional money in the short-term. And I suspect they’re probably going to spend that. There's no point leaving it in the bank and losing."

The 2018 budget forecast the price of iron ore at $US55 a tonne but it been hovering between $US80 and $US85 a tonne for the past month and has sat above $US65 a tonne since September.

The death toll from the collapse of the Vale tailings dam in Brazil has reportedly hit 201, with 107 others still missing. Vale's iron ore production is now uncertain but it could be cut by tens of millions of tonnes per year.

Treasurer Josh Frydenberg will deliver the budget on April 2 ahead of Mr Morrison calling a federal election at some point in the following fortnight.